The updating of accounts is called the adjusting process.

True

False

Accumulated Depreciation is reported on the income statement.

True

False

Depreciation Expense is reported on the balance sheet as an addition to the related asset.

True

False

A company realizes that the last two day's revenue for the month was billed but not recorded. The adjusting entry on December 31 is debit Accounts Receivable and credit Fees Earned.

True

False

If the adjustment to recognize expired insurance at the end of the period is inadvertently omitted, the assets at the end of the period will be understated.

True

False

The adjusting entry for rent earned that was previously recorded in the unearned rent account is

A. debit Rent Revenue; credit Unearned Rent

B. debit Unearned Rent; credit Prepaid Rent

C. debit Unearned Rent; credit Rent Revenue

D. debit Rent Expense; credit Unearned Rent

C. debit Unearned Rent; credit Rent Revenue

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were

used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year

ending December 31, what is the effect of these errors on revenues, expenses, and net income?

A. Expenses are understated by $3,500.

B. Net income is overstated by $2,300.

C. Expenses are overstated by $6,500.

D. Revenues are overstated by $4,200.

B. Net income is overstated by $2,300.

Revenue - Expenses = Net Income

4,200 - (1,500 + 5,000) = -2,300

If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)

A. revenue

B. deferral

C. accrual

D. liability

Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear

on the unadjusted trial balance?

A. Unearned Fees

B. Fees Earned

C. Depreciation Expense

D. Accounts Receivable

When is the adjusted trial balance prepared?

A. before the adjusting journal entries are journalized

B. before adjusting journal entries are posted

C. after the adjusting journal entries are journalized

D. after adjusting journal entries are posted

Using accrual accounting, revenue is recorded and reported only

A. when cash is received at the time services are rendered

B. when cash is received without regard to when the services are rendered

C. when the services are rendered without regard to when cash is received

D. if cash is received after the services are rendered

Adjusting entries affect at least one

A. revenue and the dividends account

B. revenue and one capital stock account

C. income statement account and one balance sheet account

D. asset and one stockholders’ equity account

Generally accepted accounting principles requires that companies use the ____ of accounting.

A. deferral basis

B. accrual basis

C. cash basis

D. account basis

The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is

A. deferral

B. inventory

C. depreciation

D. accrual

The general term employed to indicate an expense that has not been paid and has not yet been recognized in the

accounts by a routine entry is

A. accrual

B. capital

C. inventory

D. deferral

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n)

A. revenue

B. liability

C. asset

D. equity

The net book value of a fixed asset is determined by

A. original cost plus accumulated depreciation

B. original cost less depreciation expense

C. original cost less accumulated depreciation

D. original cost less accumulated depreciation plus depreciation expense

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the

following describes the effect of the credit portion of the entry?

A. increases the balance of a liability account

B. decreases the balance of a stockholders’ equity account

C. increases the balance of an asset account

D. decreases the balance of an expense account

If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?

A. increases the balance of a contra asset account

B. increases the balance of an expense account

C. decreases the balance of a stockholders’ equity account 

D. increases the balance of an asset account

A company purchases a one-year insurance policy on June 1 for $2,760. The adjusting entry on December 31 is

A. debit Insurance Expense, $1,150 and credit Prepaid Insurance, $1,150.

B. debit Prepaid Insurance, $1,380, and credit Cash, $1,380.

C. debit Insurance Expense, $1,380 and credit Prepaid Insurance, $1,380.

D. debit Insurance Expense, $1,610, and credit Prepaid Insurance, $1,610.

D. debit Insurance Expense, $1,610, and credit Prepaid Insurance, $1,610.

2,760 x (7/12) = 1,610

The systematic allocation of land's cost to expense is called depreciation.

True

False

An adjusting entry to accrue an incurred expense will affect total liabilities.

True

False

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

True

False

The financial statements measure precisely the financial condition and results of operations of a business.

True

False

An adjusting entry would adjust an expense account so the expense is reported when incurred.

True

False

Depreciation Expense is recorded in the Journal, Unadjusted Trial Balance, Adjusted Trial Balance, and Income Statement.

True 

False

True

Accumulated Depreciation appears in the Journal, Unadjusted Trial Balance, Adjusted Trial Balance, and Balance Sheet

Deferral

(Definition)

Allocation Method

(Definition)

Accrual

(Definition)